This is an English adaptation of a FoodBud historical article originally published on September 2, 2022.
According to Tonyge Ge Shuo, many Chinese restaurant operators interviewed in 2022, especially larger Chinese-dining groups, said operating had become harder than five years earlier. The article frames the issue as an internal-management problem: operators often look at the market, competitors, and industry trends, but lack a clear mirror for self-diagnosis.
It offers three mirrors for restaurant-company self-checks: common company illnesses, the founder’s own condition, and the operating pillars that support scale.
Many restaurant founders built their companies through real successes. As the company grows, some begin to believe they can do anything, leading to blind expansion or diversification into unrelated businesses.
The article cites Haidilao as an example: after listing, it expanded against the cycle during the 2020 pandemic period and pushed into lower-tier markets. By 2021, the company was under pressure, reported a large loss, and began closing stores at scale in the second half of 2021.
It also cites Xibei, a traditional Chinese dining chain, which repeatedly entered fast-food projects such as Maixiangcun, Super Roujiamo, and Yogurt House; these projects ultimately ended without lasting success.
Another example is restaurant companies building their own cashier software, hiring teams, forming software companies, and trying to sell systems to peers as a “second curve.” The article argues that cross-industry moves without logic or transferable core capability usually consume time and capital.
As restaurant companies grow, they inevitably encounter operating problems. When problems become serious, founders often look everywhere for quick remedies.
The article compares this with treating symptoms rather than causes. For example, when kitchen management breaks down, an operator may hear about a “4D kitchen” management system, invite trainers, see early improvement, and later find the system cannot be sustained or even destabilizes the team.
The point is not that specific tools are useless, but that treating isolated symptoms without diagnosing root causes leads to repeated problems.
Operators build capability through repeated experience. Success creates a mental pattern: when this type of problem appears, use this method. Repeated success can harden into inertia.
The article argues that success itself cannot be copied. What can be copied is the underlying logic, not the surface method. Even the original successful founder may not be able to repeat the same success under different timing, context, or execution conditions.
The article says many restaurant owners spend heavily on executive classes, training courses, study tours, and peer visits. In class, the theory feels useful; after returning, implementation stalls.
Methods may be brought back into the company, but often cannot be localized, sustained, or executed by the management team.
Many restaurant owners visit peers through associations, third-party organizations, training institutions, and study tours. When they see a new model, category, or format, they may copy it quickly.
One example: traditional mid-to-large Chinese restaurants visit Chengdu and see viral restaurants using a hero-product model with just over 10 SKUs and strong traffic. They copy the model but ignore whether it fits their own customer segment, price per guest, dining occasion, and site positioning. The result can be lower table spend, insufficient table turnover, and losses.
The article says the same risk appears with shop-in-shop models, bistro formats, and open-kitchen displays. Every restaurant’s positioning is a system: category, target customer, consumption occasion, internal capability, and competitive environment must align.
Many restaurant companies start through the founder’s personal capability or scarce resources. Some founders come from chef backgrounds and build strength in product and menu development; others come from operations or marketing and use store-management experience or customer resources.
This can work from zero to one. But as headcount, store count, and business complexity rise, overreliance on people exposes weakness. Human capability is hard to replicate, even with talent-development plans.
Systems, by contrast, create standardization and replication. The article contrasts this with Western fast-food chains such as McDonald’s and KFC, which reached thousands or even tens of thousands of stores in China through systems, rules, and operating processes rather than personal management.
Traditional Chinese dining companies may not need the same scale, but as they grow they need management systems, operating systems, and data systems earlier.
Many restaurant bosses have strong product thinking, especially in Chinese full-service dining where many founders are chefs. Product quality matters: poor dishes and unstable quality make repeat visits difficult.
They also tend to have strong store thinking, focusing on operations and service. But many lack brand thinking.
The article distinguishes brand from signage or trademark. A brand is the target consumer’s mental perception: whether consumers know the restaurant’s distinctive value and believe in the benefit it provides.
Product, service, and store execution earn money from capability and time. Brand can create pricing premium and higher profit. Without brand building, a restaurant cannot earn brand premium.
The article defines a moat as core competitiveness and competitive barriers that protect market share and profit.
Many restaurant operators blame lower profitability on external causes: more restaurants, more competition, more customer choice, and more intense price pressure. The article argues that internal factors often matter more.
It uses smartphones as a comparison. Over the previous decade, many Android makers competed on specifications and price. Much of the profit went to Apple; among Android players, much of the profit went to Qualcomm for mobile CPUs and Google for Android licensing. Android phones below RMB 2,000 largely earned hard operating money. In recent years, domestic brands such as Huawei and Xiaomi entered high-end phones priced from RMB 4,000-5,000 to RMB 8,000-9,000 and began competing in the high-end market long dominated by Apple and Samsung. The article says technology and brand are moats in that industry.
For restaurants, common moats such as technology, patents, network effects, and switching costs are usually less applicable. Brand is the most realistic moat.
The article notes that new shopping centers often invite McDonald’s, Starbucks, KFC, Haidilao, Xibei, and other chain brands, sometimes offering six months or more of rent-free periods and even decoration subsidies. It also notes that Haidilao’s annual reports showed rent cost as a low single-digit share of revenue, far below traditional mall-restaurant rent ratios. Lower rent cost becomes profit, which the article treats as brand premium.
The eight illnesses are: blind arrogance, self-prescribing after long illness, inertial thinking, excessive learning without execution, copying without understanding, missing systems, brand absence, and no moat.
The second mirror looks at the founder. The article compares a company to a ship that needs a helmsman and to a train that needs a strong engine. It also references the Chinese TV drama Liang Jian, where Li Yunlong says a unit’s tradition and character come from its first commander. The article’s point: the founder is the company’s soul.
Heart force has two parts.
Vision: where the founder wants to take the company and what the company should become.
Mission: why the founder is building the company. Possible answers include solving a social problem, love for the restaurant industry, responsibility to colleagues who have built the company together for 10 or 20 years, or creating a sustainable family business.
Intelligence force also has two parts.
Cognitive ability: in a competitive commercial environment, founders can only earn within the scope of their cognition. They need to keep upgrading their mental models so the company can maintain a competitive business model.
Learning ability: founders must learn efficiently and convert learning into practice. The article separates “learning” from “practice”: learning is the tool, practice is the goal. Knowledge must become company capability through deliberate application.
Capability force means the founder’s ability to run and manage the company. The article divides it into doing things and using people.
Doing things means understanding the business, especially when the company enters a new category, business model, or innovation project. The article says relying only on an external executive for a new business is unrealistic and risky; the founder often needs to learn quickly, enter the field directly, and run the model with the team.
Using people means selecting, developing, deploying, and retaining talent. The founder must be able to attract strong people, develop a core leadership team, use partners well, energize the team, and retain key employees.
The article suggests founders ask: What is the current state of my three forces? What were they like during previous success periods? Are they now short of energy? What level of capability is required for the next 3-5 years of company goals? How can I improve them faster?
The third mirror looks below the surface. The article compares a company to a building: the taller the building, the stronger the foundation must be.
It cites CITIC Tower in Beijing, also known as China Zun, in the CBD core area: 528 meters high, 108 floors above ground and 7 underground. Its foundation is described as 40 meters deep, with four main load-bearing columns, each 34 meters high and 32 meters in diameter, plus 896 support columns.
The article’s message is that a restaurant company also needs load-bearing pillars.
Product power has four elements: reliable ingredients, output quality, output stability, and dish innovation.
Reliable ingredients include reliable quality, reliable supply, and reliable pricing. Output quality and stability are kitchen fundamentals. If quality declines or becomes unstable, guest experience suffers and repeat visits fall.
Dish innovation matters because the era of relying on one signature dish forever has passed. Without continued development and iteration, guests may drift away.
Service power is especially important for full-service restaurants and larger Chinese-dining companies serving banquets, family gatherings, and hosted occasions.
Its four elements are service standards, service process, service experience, and peak-end design.
Service process is the SOP across touchpoints before arrival, during the meal, and after leaving. Service standards define execution quality. For example, if greeters bow, the standard defines whether the bow is 45 degrees or 30 degrees, and whether it happens within 3 meters or 5 meters of the guest.
Service experience requires designing from the customer’s journey. Peak-end design means creating one or more memorable high points near the end of the service experience, because not every touchpoint can be perfect under real cost and efficiency constraints.
Customer power is the ability to manage and operate customer relationships. Its four elements are customer retention, repeat visits, customer operation, and customer word of mouth.
Customer retention treats guests as member assets. When business is strong and queues are common, it is the best time to retain customers so the restaurant has an asset base to activate during slower periods.
Repeat visits come from old customers who recognize the product, service, and experience. Restaurants should analyze member data, including consumption preferences, flavor preferences, and habits, then improve operating strategy, service, and output.
Customer operation means segmenting members by spending power, occasion, and needs, then designing differentiated benefits such as points, discounts, or premium privileges. This is especially important for mid-to-large Chinese restaurants focused on hosted dining and VIP customers.
Word of mouth requires tracking satisfaction and encouraging satisfied guests to recommend the restaurant. The article references NPS, and also says restaurants should manage public-facing information such as Dianping stars, rankings, and reviews. Negative feedback should become input for continuous improvement.
Organizational power has four elements: leadership teams, execution capability, trust and emotional commitment, and company culture.
Leadership teams include the core executive team, reserve cadres for expansion, and frontline teams in front-of-house, back-of-house, and key headquarters functions.
Execution capability is described as combat capability. During the pandemic years, many restaurants faced severe operating pressure, requiring fast action and strong execution from managers and frontline staff.
Trust and emotional commitment matter because many restaurant companies start with a group of partners working through difficult periods together. The article argues that few companies become strong only by parachuting in one or two professional executives.
Company culture means vision, mission, and values. The article frames these as reflections of the founder’s original intention and mission, and as support for building a company that becomes large, strong, and long-lasting.
Cost-control power is the ability to manage cost and store-level gross margin. Restaurants differ from food manufacturing because most operate with front-store/back-kitchen models and store-level purchasing; only a small number of large chains have central kitchens or processing centers.
Although restaurant gross margins can appear high, purchasing and production are often decentralized, nonstandard, opaque, and weakly controlled, causing actual store gross margin to fluctuate.
The four elements are compliant purchasing, kitchen waste avoidance, loss reduction, and cross-functional profit improvement.
Compliant purchasing means separating sourcing decisions from purchasing execution. “Sourcing” sets ingredient, price, specification, standard, and supply rules; “purchasing” executes against those standards and corrects deviations.
Kitchen waste avoidance means managing yield and producing according to cost cards. The article says the kitchen team should control loss variance within plus or minus 2%, tracking by station, ingredient, and chef, supported by digital tools for ingredient-flow monitoring.
Loss reduction focuses on the daily receiving window. The article calls the first 3 hours after receiving the “golden 3 hours,” when price, quality, specification, and quantity deviations should be found and corrected before losses become unrecoverable.
Cross-functional profit improvement means gross margin cannot be managed by the kitchen alone. Pricing, marketing, menu adjustment, upselling, returns, R&D, procurement, marketing, floor operations, sales, and kitchen teams all affect margin.
Brand power is a long-term project. Its four elements are mental position, awareness, recognition, and momentum.
Mental position is the restaurant’s positioning: subcategory, core customer group, consumption occasion, distinctive value, and trust proof.
Awareness means more target customers know the restaurant. The article stresses effective awareness, not broad but unfocused exposure.
Recognition, or reputation, means customers perceive the restaurant’s value. Value can be functional, such as benefits and usefulness, or emotional, such as emotional resonance and identification.
Momentum comes from continued exposure, strong content, and a clear cognitive position: customers should remember the brand’s differences, benefits, and value points, then think of and choose it during consumption decisions.
The six pillars are product power, service power, customer power, organizational power, cost-control power, and brand power.
A startup restaurant company may grow from zero to one with only one strong pillar. As the company scales, more pillars become necessary. Pillars also change over time: what was once strong enough may become too short, thin, or weak for the next stage.
The article recommends diagnosing the company with these questions: How many pillars do we currently have? Which are missing? Which pillars drove past success? Which are weak today? Which pillar most constrains survival and growth? Which pillars must be strengthened for the next three years?
Note: IPO, public-company, financial-report, rent-ratio, and forward-looking 3-5-year references are historical to the original September 2, 2022 article.